Dana Gas Debt Deal Said to Include $100 Million Cash Payout

By Arif Sharif -
Nov 22, 2012

Dana Gas PJSC (DANA) plans to pay
bondholders about $100 million in cash as part of the $920
million debt restructuring accord the United Arab Emirates
company agreed this month, a person familiar with the deal said.

The cash would be paid to holders of the Shariah-compliant
notes, or sukuk, once a lockup agreement between Dana Gas and
its creditors is signed, likely later this month, according to
the person, who asked not to be identified because the
information is private. Dana Gas, which didn’t pay the $920
million sukuk when they matured at the end of October, said Nov.
7 it had reached a restructuring agreement with its main
noteholders including a partial cash payout. A spokeswoman for
Dana Gas declined to comment on the restructuring terms.

“It is the best case scenario for sukukholders, apart from
getting fully repaid at maturity,” Gus Chehayeb, Dubai-based
research director for the Middle East and North Africa at
investment bank Exotix Ltd., said by phone today.

BlackRock Inc. (BLK) and Ashmore Group Plc. (ASHM) hold more than 50
percent of the Islamic bonds, a person familiar with the deal
said last month. Dana Gas said Nov. 7 the restructuring deal
with the main sukukholders included splitting the outstanding
securities into ordinary and convertible tranches with “revised
economic terms” after an initial cash payment.

‘Better Deal’

Half of the remaining securities will be converted into
sukuk and the rest turned into convertible Islamic bonds, both
maturing in five years, according to the person. The so-called
blended yield on the two securities will be 8 percent, with the
ordinary sukuk paying more than the bond’s existing 7.5 percent
yield and the convertible notes paying less, the person said.

The rate at which the new convertible notes can be
exchanged for shares is significantly lower than the 1.93 dirham
price for the existing notes, the person said. Dana Gas shares
closed at 39 fils on the Abu Dhabi bourse today. The conversion
price would include a premium above the stock price in line with
terms on recent convertible bonds, he said.

Dana Gas’ bonds rose 0.2 percent at 79.78 cents to the
dollar at 5:18 p.m. Dubai time, according to data compiled by
Bloomberg.

“The market was expecting a harsh restructuring and I
think creditors got a better deal than the shareholders did,”
Chehayeb said. For the shareholders, the terms clear “a dark
cloud over the equity price” due to the prospect of a default,
he said.

Dana Gas, which is based in the U.A.E. emirate of Sharjah,
missed payments on the sukuk after facing payment delays from
Egypt and Iraq’s Kurdistan region, its biggest sources of
revenue, amid political unrest.